- 26 -
TBS argues that section 267(f) has no application to the UA
Sale. Alternatively, even if section 267(f) does apply, TBS
takes the position that paragraph (c)(6) and (7) of the 1984
temporary regulation do not prevent MGM's deduction of the UA
Loss because MGM and Tracinda were not members of the same
controlled group immediately after the UA Sale. TBS takes the
position that the requirement for there to be a controlled group
relationship immediately after the sale is a consequence of the
1984 temporary regulation's adoption of substantial portions of
the consolidated return regulations.24
In order properly to understand the parties' arguments, it
is useful to give an overview of the operation of section 267.
Section 267(a)(1) provides in part:
No deduction shall be allowed in respect of any loss
from the sale or exchange of property, directly or
indirectly, between persons specified in any of the
paragraphs of subsection (b). * * *
24 TBS additionally argues that if the 1984 temporary
regulation produces the result respondent advocates, it is
invalid. TBS argues that par. (c)(6) and (7) of the 1984
temporary regulation, if applicable in this case, are invalid
because they disallow, rather than defer, a sec. 267(f) loss to
the seller (MGM), reincarnate the disallowed loss into its
prerecognition state as basis, and relocate that basis to
somebody else (Tracinda), thereby permanently denying the
taxpayer (MGM) the benefit of the UA Loss. In view of our
interpretation of the scope of the 1984 temporary regulation, it
is not necessary for us to consider the invalidity argument. We
note that TBS' invalidity argument was made moot for taxable
years beginning after July 12, 1995, by the removal of the loss
relocation provisions in the Commissioner's final regulations.
See infra note 29.
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